tv Nightly Business Report PBS March 27, 2012 7:00pm-7:30pm EDT
>> tom: day two of historic arguments over the health care reform act. >> reporter: i'm darren gersh at the supreme court. government intrusion or reasonable regulation? the justices debate health care and the individual mandate. >> reporter: i'm erika miller in new york. stocks and bonds are duking it out. i'll look at where the big gains are likely to come for your portfolio. >> susie: and with home prices still falling, what makes more sense, renting or owning? we'll see what two twenty- somethings are thinking. it's "nightly business report" for tuesday, march 27. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening and thanks for joining us. susie, a closely divided supreme court today dove into the question of whether the government can force millions of americans to buy health insurance. >> susie: tom, the individual mandate is at the heart of the massive health care reform law that takes full effect in two years. but the justices today debated whether that requirement is a congressional overreach or a reasonable exercise of government power. >> tom: much of the debate centered on whether or not health care is a different kind of market, one where the decision to not buy insurance
raises prices for everyone else. darren gersh picks up the story. >> reporter: the justices struggled today to draw the line. "if the government can force someone to buy health insurance, what about other products?" wondered chief justice john roberts. >> can the government require you to buy a cell phone because that would facilitate responding when you need emergency services? you can just dial 9-1-1 no matter where you are? >> reporter: arguing for the government, donald verrilli said health care is different, because everyone is going to need to visit a doctor or hospital one day. >> and the distinguishing feature of that is that they cannot... people cannot generally control when they enter that market or what they need when they enter that market. >> reporter: because the uninsured will eventually pay something for their care, the government says requiring an up- front purchase of health insurance is simply shifting the timing of the payment. justice anthony kennedy is the key swing vote between liberals and conservatives on the court, and he was skeptical. >> here, the government is
saying that the federal government has a duty to tell the individual citizen that it must act, and that is different from what we have in previous cases. and that changes the relationship of the federal government to the individual in the very fundamental way. >> reporter: that is the key argument of small businesses suing to stop the law. >> we've survived as a nation for 200-plus years without ever doing this before, and so, this unprecedented and unbounded assertion of the ability to force citizens to transfer property will hopefully not happen again. >> reporter: later, justice kennedy seemed to accept the government's argument that health care is a special case, and congress acted within its constitutional power to regulate commerce to end cost-shifting from the uninsured to the insured. >> in the insurance and health care world, both markets-- stipulate, two markets-- the young person who is uninsured is
uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries. >> reporter: all sides seem to agree, if congress wanted to, it could have simply extended medicare or medicaid to cover all americans. and law professor susan bloch says that could influence justice kennedy's thinking. >> because everyone agrees congress could do this mega- public option, which is much more infringing on our individual choices, that i think will convince kennedy to uphold this. but its a very hard prediction because he was clearly troubled by the law today. >> reporter: we should know where justice kennedy and his colleagues come down on the reach of health care reform by the end of june. that's the traditional deadline for the most historic opinions. darren gersh, "nightly business report," washington. >> susie: our next guest is a health economist who played a key role in developing the healthcare reform law in massachusetts.
he's jonathan gruber, professor of economics at m.i.t. hi, jon. >> good to be here. >> susie: so you heard our report. i know you're following this case very carefully. how do you think it's going to play out? will the supreme court strike down this rule or will it hold it up? >> i'm not a constitutional lawyer. but i agree with what the reporter said at the very end there. what the law professor said at the very end there. it's hard to imagine how the medicare program which is much more interventionist than this program is constitutional when this is not. after all medicare forces you into a single government paid plan whereas this plan gives you the option of private health insurance. i don't know how you could possibly conceive that medicare is constitutional and this isn't. >> susie: now you have an add vekt for this mandate requirement not only at the national level but also in the state of massachusetts. tell us why this requirement you think is so important for individual americans. >> most of your viewers today will have insurance from their employer or the government. for them the health market works pretty well.
they might not understand why this is big deal. for those who do not, they face an incredibly harsh and discriminatory insurance market where you're not covered for any pre-existing conditions and where the minute you get sick, you can be dropped from your insurance or your rate can be sent through the roof. there is not meaningful insurance in any sense to those who do not get insurance from their employer or the government. that has to end. the only way to end that is to guarantee broad participation in insurance markets. five states tried to end it. they tried to outlaw discrimination. it was a disaster. the only place it ever worked was in massachusetts once we imposed the individual mandate. once we connected ending discrimination insurance markets with the individual mandate, we were able to cover two thirds of our uninsured citizens and bring prices down by 50%. >> susie: let's just say that the supreme court rules against the mandate. what is plan-b? what are the alternatives? >> well, there's not a good alternative for ending discrimination in the insurance market. if you get rid of the mandate
you can't end discrimination in the insurance markets. that's the core of what this law does. it expands the medicare medicaid program and offers tax credits for insurance and includes improvement provisions to control costs. those parts will stay. but the court... to me the core accomplishment of the law which is ending this incredibly unfair practice of insurance discrimination will not happen and will end up with the same broken markets we have today. >> susie: if the mandate is out, are there any costs and economic implications here? >> yes, if the mandate is out what i've estimated it will cover only half as many individuals. yet the government will spend three quarters as much. we won't save that much money but cover a lot fewer people. that's because the sick will still sign up. since the healthy rn signing up, the sick will sign up at much higher prices. you'll end up with a policy that is less effective and less efficient. you'll cover fewer people and spend almost as much. it would be a terrible outcome. >> susie: interesting conversation. we'll see how it plays out.
thank you so much, jon, for coming on the program tonight. >> you bet. my pleasure. >> susie: we've been speaking with jonathan gruber, professor of economics at m.i.t. >> reporter: i'm sylvia hall. still ahead, with rent prices on the rise and interest rates low, do you rent or do you buy your home? we talk to some d.c. area residents about how they chose. >> susie: remember a.i.g., the bailed-out insurance giant that got a big bailout during the financial crisis because it was "too big to fail." it looks like american taxpayers are making a nice profit on the loan. c.e.o. robert benmosche believes taxpayers will make between $5 billion to $10 billion on a.i.g.'s rescue. the company still owes the u.s. treasury an estimated $45 billion. meanwhile, federal reserve chairman ben bernanke was teaching back in the classroom at george washington university today. his lecture today focused on the central bank's actions during the financial crisis. bernanke told students not to expect a repeat of the fed's response to a.i.g.
>> what we had to do with bear stearns and a.i.g. is obviously not a recipe for future crisis management. >> susie: bernanke told the students a system that includes companies thought to be "too big to fail" is unfair. instead, he thinks regulators should aim for a financial system that allows big firms to fail safely. >> tom: the fed chairman has been blamed for the sharp sell- off in bonds this month. march is on track to see the biggest decline in bond prices in over a year. but it's a different story for stocks. the major indexes have rallied sharply in march, despite hitting a minor speed bump late today. the dow fell 44 points, the nasdaq lost two, and the s&p dropped nearly four. but the indices are just below their highest prices since the great recession. erika miller takes a closer look at the latest stock/bond rivalry, and which option is the better place to put your cash.
>> reporter: stocks have gone up virtually in a straight line this year, with the s&p 500 surging more than 12%. so investors wonder, is the pendulum finally shifting away from bonds? the s&p 500 is trading at its highest level in three years, and many experts think the gains will continue. >> we are starting to see the retail investor tippy-toe back towards the market a little bit. in other words, after 2.5, three years of the stock market screaming up 100%, investors almost have no choice but to cry "uncle" at some point and throw in the towel and start to look at stocks again. >> reporter: history also supports the idea that stocks will continue to rally. since 1945, when the s&p 500 rose 10% or more in the first quarter, it also gained in the second 75% percent of the time. meanwhile, speculation that the federal reserve is unlikely to further stimulate the economy with more bond purchases has prompted some investors to dump
treasuries. so the yield on the ten-year treasury note, which moves in the opposite direction to price, has gained nearly a quarter of a percent this month to 2.18%. if it holds, it will be the worst month in over a year. so some investment strategists say it may be time to scale back on government i.o.u.s. >> start to look at a more broadly diversified bond portfolio. for example, we do see some opportunities remaining in high- yield and some in corporate bonds. we like municipal bonds if they are high quality. >> reporter: but there are still plenty of others who think the three-decade bull market in bonds can continue. bill gross, head of the world's largest bond fund, believes federal reserve policy makers will hint at another round of debt purchases when they meet in april. and there are still other factors that could send investors scurrying for safety again. >> there are still a number of significant risks out there. the situation in the eurozone has improved but is not solved. we still have this threat of a
geopolitical flare-up in the middle east, which could play some bad tricks to the markets. >> reporter: maybe individual investors know something the pros do not. in the past month, over $7 billion has gone out of u.s. stock mutual funds, while twice that amount has gone into bond funds. erika miller, "nightly business report," new york. >> susie: congress is giving small businesses a break by easing a host of business regulations. in a rare show of bipartisanship, the house today, passed the "jobs act" with more than 90% of members voting for the plan. "jobs" stands for "jumpstart our business startups." the bill eases corporate governance and reporting requirements for i.p.o.s. it also includes things like tax incentives for hiring veterans and the long-term unemployed. the measure now heads to the white house for president obama's signature.
>> susie: m.f. global will be in the spotlight on capitol hill tomorrow. a top executive from the failed trading firm will tell lawmakers that she was not comfortable with putting customer funds at risk in the days ahead of the company's collapse. $1.6 billion in client funds is missing, and former m.f. global c.e.o. jon corzine has testified he doesn't know where the money went. more than 250 m.f. customers have teamed up to get their money back, and they're hoping congress can uncover the smoking gun. diane eastabrook reports. >> reporter: for the past six months, the m.f. global scandal has consumed john roe's life. the veteran trader founded the commodity customer coalition last fall to help m.f. global customers like himself recover their missing money.
roe hopes tomorrow's hearing before the house financial services committee will determine if m.f. global committed fraud. >> what we want to do is we want to establish that there was either general criminal intent or there was intent after the fact, that someone did something and then covered it up because they knew they had committed a crime or broken a rule. >> reporter: an email suggests former c.e.o. john corzine directed some customer money into a company account at j.p. morgan chase to cover a shortfall. at the time, j.p. morgan asked for assurances the money was m.f. global's to use. roe wants the subcommittee to question bank witnesses about why it kept the money when it suspected it might belong to customers. >> if you knew there was a problem with the transfer and they refused to swear to you that this wasn't customer money, why do you still have it because, very clearly, it is customer money. >> reporter: roe says, to date, members of his coalition have received about three-quarters of their money back. he's still optimistic they will eventually be made whole. diane eastabrook, "nightly
business report," chicago. >> susie: home prices in most of the nation's major cities dropped for the fifth straight month in january, a sign the modest sales increases seen recently have yet to boost prices. the s&p case-schiller index found the average home sold in january lost eight-tenths of its value from december. prices in 17 of the 20 cities the index tracks fell from january of last year. >> while this report is disappointing, it's disappointing for this particular month. it's not like the housing recovery is about to vanish like it has done in the past. it's that we have to wait a little bit longer and keep
watching home sales, keep watching starts, and listen to reports from homebuilders and that kind of thing. >> susie: home prices hit new lows in atlanta, chicago, cleveland, las vegas, new york, portland, seattle, and tampa. registering gains-- phoenix, washington, and miami. >> tom: for the next two weeks, we're reporting on local housing markets across the country. we begin our series in washington, d.c. the housing collapse made a lot of people renters, pushing rents higher even as housing prices have fallen. but higher rents have made owning more affordable in many markets. in the nation's capital, sylvia hall spoke with two women about how they decided whether to rent or buy. >> reporter: sunny views, bright walls, and urban decor make up this little condo in an up-and- coming d.c. neighborhood. 24-year-old kira neal holds the key and the deed. neal is one of a growing number
of young people who've opted to buy a home instead of paying sky-high rents. >> it didn't make sense to stay in the same place, throwing my money into a hole every month and not seeing any return on my investment. so i decided to start looking at mortgage rates, interest rates, and it made sense to just buy. >> reporter: she splits her mortgage and fees with a roommate, and estimates that by owning instead of renting, they both save $300 to $400 each month. it hasn't all been perfect. neal admits she made some rookie mistakes, like not knowing she'd be on the hook for thousands of dollars in property taxes. but she says it's worth it. >> it is just not feasible anymore to rent, and it makes more sense to put the same amount of money to put in towards a long-term investment. >> reporter: compared to the cost of buying a home, rent prices in the u.s. are higher than they've ever been before. but here in the d.c. area, you still find plenty of people who choose to rent.
31-year-old alexis grant pays $1,250 each month for an apartment just outside of washington. she's an avid traveler who paused her career a few years ago to backpack through africa. to her, a mortgage sounds like a ball and chain, and she's willing to pay up to avoid it. >> i don't feel like i need roots necessarily in a place, and even though i plan on staying here for a while, i like to have the flexibility to leave if i want to. >> reporter: sure, she's locked into a lease, and she has considered owning a home before, but as the housing market struggles to regain footing, buying is a risk she's just not willing to make. >> i just feel like buying isn't really the investment it once was. i have a lot of friends who bought a few years ago, and now are in the hole and they cant get rid of their place. >> reporter: the decision to buy or rent isn't easy. here in the nation's capitol, it comes down to personal choice, and whether you're willing to take a bet on the still struggling housing market. sylvia hall, "nightly business report," washington. >> susie: tom, tomorrow, our
coverage of the spring selling season continues with a look at how home sales are holding up in the chicago area. >> tom: susie, that's my old stomping grounds. our diane eastabrook reports a surprising number of buyers there are taking on a new role, landlord. let's take a look at tonight's "market focus." homebuilding stocks were among those limiting today's market losses, as the major indices experienced an afternoon swoon, ending at their worst levels of the day. the s&p 500 couldn't find a decisive direction for much of the session, trading around the unchanged level until the final hour, when selling pushed prices lower, ending down a fraction. the financial sector led the way lower, down more than 1%, followed closely behind by the energy and telecommunications sectors, down nine-tenths of a percent each. bank of america was the biggest loser in the financial sector, as well as the dow industrial index. shares shed more than 3%. today's sell-off came as investment firm baird cautioned
the stock rally this year can't continue for bank of america. baird voiced worries over the bank's earnings power. one area of strength in finance today-- private equity firm kkr. it announced the hiring of a former wall street c.e.o. john mack headed up investment bank morgan stanley during the credit crisis, leaving last year. he is now a senior advisor to private equity firm kkr. shares of kkr fought the weak tape for the financial sector, rising more than 1% to a six week high. we mentioned homebuilders earlier. they also fought the weak tone in the market, even though the latest national home price data continue showing weaker prices. homebuilder lennar helped its stock sector by reporting earnings twice as much as wall street anticipated. a key sign of strength, new orders for homes, jumped more than 30%, leading the company to say it sees a real recovery in housing. still, lennar's c.e.o. calls the recovery erratic, but notes the builder is able to raise prices while reducing its inventory of unsold homes. with today's 4.7% rally, lennar stock is at its highest price since the summer of 2007. more analysis of lennar's stock
chart under the "blogs" tab at nbr.com. other builder stocks caught bids off the lennar optimism. ryland was up 4%, pulte rallied 3%, and d.r. horton finished up 2%. energy shares were under pressure after mcmoran exploration announced finishing work on a key well in the gulf of mexico is being delayed because of equipment problems. that sent shares plummeting, down 7.5%. volume jumped ten times normal. the well in question had been expected to be finished by the end of this week. coal stocks were also dropping. the environmental protection agency proposed new limits on emissions from new power plants. that could hurt demand for new coal power stations. patriot coal fell more than 3.5%, peabody was down almost 2%, alpha natural resources dropped 1%. life after a big customer left was better than expected at walgreen. earnings at the pharmacy giant fell from a year ago but were a penny stronger than expected. walgreen's lost the business of
pharmacy benefits manager express scripts and the millions of prescriptions that went along with it. but the stock rose more than 1%, up to its highest close year to date. and that's tonight's "market focus." >> susie: if you haven't filed your federal tax return, the tax man is waiting. this year, the deadline is april 17. all this week, kevin mccormally of kiplinger's personal finance is offering you his best tax advice. in tonight's "tax tips," kevin says there's a new form that's turning capital gains into capital pains. >> investors have an extra tax form to fill out this year, and for most of us, it's simply a waste of time. the offending form is the 8949,
which the i.r.s. created to go along with new basis reporting rules that began going into effect in 2011. if you bought stock in 2011 and sold the shares before the end of the year, your broker has to report to you, and the i.r.s., not only how much you received from the sale but also what you paid for the shares. that's your tax basis. in the long run, all stocks purchased starting in 2011 will be covered by this rule. it expands to cover mutual funds purchased starting this year. so, in the long run, it will make it easy to figure the exact gain or loss on the transaction, and for the i.r.s. to check that you're reporting the right amount on your tax return. but this year, the primary result is confusion. you have to use the form 8949 to report all 2011 sales, even though the vast majority aren't covered by the rule and, therefore, you won't get the basis information. and get this-- you may need as many as three versions of the form, based on whether your broker sent you a form 1099-b
reporting the sale and, if so, whether or not the form reported the basis, too. you carry over information from your 8949s to a schedule "d", which in the past sufficed for reporting capital gains and losses. on the bright side, if you use software to prepare your return, it will greatly simplify this new chore. i'm kevin mccormally. >> tom: a friendly wager is one thing, but do the business of professional gaming and the business of professional football mix? here's rick horrow with tonight's "beyond the scoreboard." >> reporter: the nfl is the only major sports league that doesn't currently allow casinos to advertise in its stadiums. however, all that could change as early as this week if nfl team owners vote on the issue, as expected. the most valuable of all u.s. sports properties, the nfl over the years has taken a conservative stance on gambling. the league believes limiting stadium casino advertisements distances itself from the gambling industry. after all, an estimated $80
billion to $100 billion is illegally wagered on nfl games annually. now is the time to embrace casino ads. teams could make $3 million each by selling the sponsorship category. though the league is worried about being seen as close to gambling, teams have been selling state lotto sponsorships since 2009. i doubt fans will view casino ads as promoting gambling, the same way they know beer sponsorships aren't meant to encourage alcoholism. that's not to say the ads won't come with restrictions. casinos with nfl sponsorships wouldn't be allowed to have a sports book, nor could they use team logos in marketing. but they would be in front of thousands of potential customers for gaming. this hardly is a gamble for the nfl, the casinos, or their shareholders. i'm rick horrow. >> susie: that's "nightly business report" for tuesday, march 27. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night.